The supply chain is no longer a back-office afterthought. The global supply chain has become an essential business enabler and differentiator that can significantly impact an organization’s bottom line and market capitalization. Given growing uncertainty from volatile geopolitics, climate change and fast pace of technological advancements, traditional siloed supply chain planning approaches are insufficient for organizations to thrive in this age of uncertainty. Only a business-driven, intelligent, connected, and end-to-end supply chain will help organizations stay ahead of the business curve. The time to transition from descriptive analytics to prescriptive analytics is now!
The supply chain is no longer a back-office afterthought. The global supply chain has become an essential business enabler and differentiator that can significantly impact an organization’s bottom line and market capitalization. Given growing uncertainty from volatile geopolitics, climate change, and the fast pace of technological advancements, traditional siloed supply chain planning approaches are insufficient for organizations to thrive in this age of uncertainty. Only a business-driven, intelligent, connected, and end-to-end supply chain will help organizations stay ahead of the business curve. The time to transition from descriptive analytics to prescriptive analytics is now!
The progression from Industry 4.0 to Supply Network 5.0 signifies a leap from the automation and digitalization of individual processes and production towards a highly interconnected, decentralized system where every element of the supply chain is digital and responsive. It is the transition from a company-centric, digitally enhanced supply chain to a fully digital, ecosystem-oriented supply network.
Industry 4.0 has spent the last 10 years concentrating on digitization. It’s about IoT connections and big data. But we’re entering the era of Supply Network 5.0, where the relationship between human intelligence and automation is balanced. Now it’s not just about being connected and digital; it’s about being human-centered. The automation has to be used to enhance human decision-making and not become black boxes.
This is the “chain” in this context being replaced with a “network”. One-way flows are now multi-way flows, where data, goods and money are constantly being exchanged between suppliers, producers and consumers. In this world, there’s no room for a separate, individual, ERP system but there is a need for a system that provides full supply chain visibility and real-time collaboration.
Finally, we have the AI and Quantum Computing intelligence revolution. This revolution is about machines that are thinking and are intelligent. It will change the world as much as, if not more than, the Internet has.
Firstly, the amount of data from the supply chain — be it from sensors on trucks, ships and trains, to sentiment analysis from social media — is growing beyond the ability of humans to comprehend. Here, AI and ML come to the rescue. AI is taking supply chain management from descriptive analytics (what has happened) to prescriptive analytics (what should we do).
Using historical and real-time data to recognize patterns that are not always visible to the naked eye, AI can now more accurately forecast changes in demand than ever before. In fact, companies that use AI-based demand forecasting tools have been able to cut their forecast errors by 30 to 50 percent and, as a result, have seen lost sales due to stockouts decrease by up to 65 percent.
In the longer term, Quantum Computing will be able to address optimization problems that are unsolvable for classical computers. This could be to find the optimal routes for thousands of trucks in real-time to reduce fuel consumption or the simulation of millions of risk scenarios. Quantum algorithms can explore massive solution spaces in parallel and this increased computational capability will be required to tame the many complex variables in global logistics networks.
Also Read: The Quantum Advantage: Revolutionizing Logistics Optimization.
We are now living in the age of “visilience.” Visilience, a term coined by Carina Chocano, is a portmanteau of “visibility” and “resilience.” In the age of visilience, we valorize the self-optimizing, always-visible work of being resilient, regardless of whether such work is needed or possible.
A basic lesson learned from COVID-19 and recent geopolitical events is that a major weak point of global trade is a lack of multi-tier visibility. Many companies are familiar with their Tier 1 suppliers, but they know little about the risks in their Tier 2 and Tier 3 supply chain networks. To achieve true resilience, companies need “visilience” — visibility + resilience.
To do that, businesses are using digital twins and graph technologies to model the intricate relationships between nodes in the supply network, then running simulations: What if this Asian port is shut down? A digital twin can immediately tell you the effect on your business’ profit and loss statements for specific products, along with suggestions for how to compensate for the closure.
Here we leverage platforms like enterprise knowledge graphs (which is being led by o9 Solutions) that help connect the dots in an organization to make the digital brain (or the nervous system) that gets the demand and supply signals transmitted across the ecosystem so that when something goes wrong in a node, all the other nodes are alerted in a seamless manner and adjustments are made in real-time.
While this topic could be a post on its own, I will try and give you the short version. Integrated Business Planning (IBP) is a business management process that brings finance and operations together. It enables leadership to make better decisions because it connects the dots between financial outcomes and operational reality. The goal of IBP is to provide the best possible financial performance by analyzing and optimizing supply and demand. As part of this process, you will see collaboration across different functions in the organization — just like we want to see with sales and marketing. In a company practicing IBP, you would expect alignment between the sales strategy and the production plan. IBP is all about finding the balance between the “top-down” approach of financial planning and the “bottom-up” reality of what is happening on the production floor.
That resiliency, however, has to be profitable, which is why Integrated Business Planning (IBP) is a key piece of this. While the classic Sales and Operations Planning (S&OP) process has generally centered on volume matching of supply and demand, IBP also incorporates financial planning, so there is alignment of operational decisions with revenue and margin objectives.
In the IBP process, volume and value are interrelated. Any proposal to build inventory to mitigate a risk is viewed in the context of the resulting impact on working capital. This process gets sales, marketing, operations, and finance out of their respective silos and onto the same page. It moves planning from a once-a-month exercise to an ongoing, event-driven process that executes the company’s business strategy.
There is an absolute need for circularity and sustainability. Circularity and sustainability are no longer a choice, but an imperative. These principles must guide every aspect of our lives and decision-making processes. Incorporating circularity into your work, for instance, is a way of embracing sustainability. In every industry, there are abundant opportunities to make a difference. Whether it’s enhancing the sustainability of existing products or developing entirely new sustainable products, there are various paths to contribute. It’s essential to find where you can add value and make the most significant impact.
Sustainability is not a “nice-to-have” anymore. It is a license to operate. The main drivers for the implementation of Circular Supply Chain Management (CSCM) are government regulations and customer expectations. A circular supply chain is restorative in nature. The objective is to loop back the materials, in the form of either a part or raw material, to the point where they can be utilized in the supply chain to maximize the use of the material for as long as possible. CSCM involves reverse logistics, remanufacturing and recycling.
Tech underpins the circular economy: Blockchain offers immutable traceability that can confirm, for example, that recycled materials have indeed been used to produce a new product and that raw materials are sourced in a responsible way. IoT sensors monitor the condition of assets, allowing companies to undertake predictive maintenance and prolong the life of their assets. The market has already caught on: IoT investments in logistics totaled $39.6 billion in 2022 and are expected to balloon to $114.7 billion in 2032 as companies spend more on sustainable infrastructure.
Looking ahead to 2030, supply chain management will have to be digital and sustainable. The companies that will thrive in the next decade are those that think of their supply chain as a digital, cognitive and circular network rather than a linear flow of materials from point A to point B. Companies that leverage AI to predict, use IBP to integrate financially, and that embrace circularity will be able to cope with any disruption and even flourish in times of uncertainty.